Northern Ireland Water has revealed it nearly ran out of money last month and needed emergency funding to keep it afloat financially.
Stormont’s Infrastructure Committee was told that the government-owned company prepared a contingency plan to shut down its wastewater operation in a bid maintain drinking water supplies. NI Water is funded through an annual block grant provided to Stormont by the UK Treasury.
The firm’s chief executive Sara Venning and director of finance and regulation Ronan Larkin explained the funding pressures the company faced during an appearance before Members of the Legislative Assembly (MLAs). Larkin said that since the last annual budget was set in April 2021, energy costs and inflation had risen sharply. He explained: “The regulator assumed inflation of 2.7% almost a year ago. We know that inflation is running at about 7.5% and possibly rising. On top of that there is increased energy costs which is likely to continue.”
Larkin said at the time of the October 2021 monitoring round, NI Water was facing a shortfall of £19.7 million in its annual budget. In the event a combination of savings, additional allocations last October and last month, extra funding from the Department for Infrastructure and emergency funding of £1.8 million from the Department of Finance three weeks ago saved the day.
MLAs were warned that the utility found this piecemeal funding model “unsustainable and unfit for purpose”.
Northern Ireland's Utility Regulator last week reported that in the year 2020-21 NI Water "continued to deliver an improved overall level of service to consumers, but underperformed against its operational expenditure (opex) efficiency target."
In its 2019-20 Cost and Performance Report the watchdog said that, at £224.4m, the company's operating expenditure for the year – its last in its previous (PC15) price control period, exceeded its allowance by £19.1m.
The regulator said the company's capital investment was "constrained by the available public
expenditure budget." It went on to report: "The indicative capital budget used for investment planning purposes in PC15 was significantly less than the investment need identified by NI Water and has
constrained necessary improvements to services.
Looking at next current price control (PC21) the Utility Regulator said that while NI Water had deliver the planned outputs for PC15 "this has not been sufficient to address existing capacity issues, particularly for wastewater services." It said the company had highlighted a "growing issue of capacity constraints at
wastewater treatment works and in the sewerage network which act as a constraint
on current and future development."
In its Business Plan for PC21 the company has identified the work it considers essential and
affordable from a tariff perspective. Burt the regulator said NI Water estimated that "significantly more funding is needed to sustain existing services, meet its legal obligations and support economic
and social development."
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